Home Sales Plunge Over 30 Percent in Biggest Drop on Record: Redfin

A 'For Sale' sign hangs in front of a home in Miami, Fla., on June 21, 2022. (Joe Raedle/Getty Images)

Sales of luxury and non-luxury homes fell by more than 30 percent in the three months ended Nov. 30, with price growth nationwide slowing down, among which Californian metropolitan areas saw some of the biggest sales declines, according to real estate brokerage Redfin.

Luxury home sales fell by 38.1 percent during the period year over year, which is the biggest decline on record, according to a Redfin news release on Dec. 28. For non-luxury homes, sales fell by 31.4 percent, which is also a record drop. Redfin blamed the loss of momentum in the luxury and overall housing market this year on factors such as relatively high interest rates, inflation, a sagging stock market, and fears of recession.

However, the sharper decline in the high-end market is being blamed on the nature of the market. For instance, luxury goods tend to be among the first to face budget cuts in times of economic stress.

Moreover, as luxury properties are usually seen as investments, an expected decline in home values and rents in 2023 will also negatively affect sales and value of such properties. As high-end home sales saw an “outsized growth” during the pandemic, they tend to have more room to fall.

Price growth in both luxury and non-luxury markets eased during the period, growing by only 10 percent year over year when compared to the 17 percent growth during the year-ago period. The median sales price for non-luxury homes was $325,000, while that for luxury homes was $1.1 million.

Largest and Smallest Declines

When it came to high-end home sales, expensive coastal markets saw the largest declines. In Nassau County, New York, sales fell by 65.6 percent, which is the biggest decline among the most populous metropolitan areas.

This was followed by four Californian metropolitan areas: San Diego, which saw a 60.4 percent decrease; San Jose fell by 58.7 percent; Riverside by 55.6 percent; and Anaheim by 55.5 percent.

The smallest sales decline was in Kansas City, Kansas, at 20.2 percent; followed by Cleveland, Ohio, at 21.5 percent; Virginia Beach, Virginia, 26.2 percent; Milwaukee, Wisconsin, 26.4 percent; and Charlotte, North Carolina, at 28.3 percent.

Redfin suggests that overall homebuyer demand could be creeping back up as mortgage rates decline. “There has been a small shift in the market that’s not fully showing up in the data yet. With mortgage rates falling, a lot of house hunters see this as their moment to come back and compete,” said Seattle Redfin agent Shoshana Godwin.

“Many of my buyers are taking out jumbo loans—mortgages typically used for purchases of high-end homes. While some data show jumbo mortgage rates above 6 percent, some of my buyers are getting rates in the low 5 percent range.”

Home Price Decline in 2023

Redfin is expecting the median home sales price to fall by 4 percent, to $368,000, in 2023, which would be the first such annual decline since 2012. Elevated mortgage rate is pegged to be the main reason behind the drop in sales. If there is no shortage of homes, the fall will be bigger, it stated.

New listings are expected to decline through most of 2023, keeping total inventory close to historically low levels while also blocking prices from plummeting. Existing home sales for 2023 are estimated to be at 4.3 million, lower than 2022 by 16 percent.

According to the S&P CoreLogic Case-Shiller Index, home prices had fallen in July from the previous month, the first-ever time since 2012 that there has been a national decline.

In an interview with CNN last month, Bank of America CEO Brian Moynihan predicted a mild recession next year, and the housing market to see a downturn for two years.